Hi,

My mother would like to gift me shares in a mutual fund that she has.

The total value of the shares is around $18,000 currently.

I know that the annual gift limit is currently $13,000, so this puts this gift about $5,000 over the limit. (She is not married, so there is no way for the gift to be divided)

I know that gifts over the limit then can be counted against the estate exemption, which used to be $1 million, but is now something like $5 million, which my mom's estate would never reach (might be over the previous $1 million limit).

If she gifts me the fund, how does she handle the $5000 overage on the gift limit? Is it just a form on her taxes? She says she uses Turbo Tax and it never has asked her about gifts, so she's not sure how it would be put in. She doesn't want to make her taxes too complicated. Just what is entailed in doing the gifts against the estate exemption limits? Is it complicated?

Do I then assume her tax basis for the fund? I was assuming so, but want to make sure. If I sold it after receiving it, would it still be long term capital gains because she had the fund a long time?

I suggested maybe she gift me part of the shares in the fund this year, to the $13,000 limit, and part next year, but she thinks this would be a hassle. She thought about it a while and asked if maybe she could gift the whole thing on Dec 31 and count it for 2012 and 2013.

I don't really need the money (although it would be nice, of course) and suggested maybe leaving the fund in her estate that I will inherit would be more financially beneficial, as I would then get a step up in the cost basis, and her estate is going to be lower than the estate tax exclusion limits. But she says the fund is not performing and she doesn't want it anymore, but she doesn't want to sell it herself and pay the capital gains.

Any thoughts or suggestions?